Transcribed Image Text
The most recent financial statements for Crosby, Inc., follow.Sales for 2018 are projected to grow by 25 percent. Interestexpense will remain constant; the tax rate and the dividend payoutrate will also remain constant. Costs, other expenses, currentassets, fixed assets, and accounts payable increase spontaneouslywith sales.CROSBY, INC.2017 Income Statement Sales$751,000 Costs586,000 Other expenses22,000 Earnings before interest and taxes$143,000 Interest paid18,000 Taxable income$125,000 Taxes (23%)28,750 Net income$96,250 Dividends$29,838 Addition to retained earnings66,412CROSBY, INC.Balance Sheet as of December 31, 2017AssetsLiabilities and Owners’ Equity Current assets Current liabilities Cash$21,040 Accounts payable$55,200 Accounts receivable43,980 Notes payable14,400 Inventory95,960 Total$69,600 Total$160,980 Long-term debt$134,000 Fixed assets Owners’ equity Net plant and equipment$427,000 Common stock and paid-in surplus$116,500 Retained earnings267,880 Total$384,380 Total assets$587,980 Total liabilities and owners’ equity$587,980If the firm is operating at full capacity and no new debt orequity is issued, what external financing is needed to support the25 percent growth rate in sales? (Do not round intermediatecalculations.)